Bill Gates is one of the founders of software giant Microsoft (MSFT).
Before Microsoft went public in 1986, he held 11,222,000 shares in the company. He owned 49.20% of it.
He sold a portion of his stake at the IPO, and has been regularly and consistently been reducing his stake in Microsoft for the past 38 years.
This is how the stock price did since the IPO:
The company initiated a dividend in 2003, and has been increasing it annually since 2004.
Many of the funds have been allocated through his private family office, and have been diversified away.
Much of the funds have also found their way to his charitable arm, the Bill and Melinda Gates Foundation, which has worked on eradicating a variety of issues around the world (e.g. polio).
The money has done a lot of good.
It's still fascinating to think about how much this stake would have been worth, had he not sold anything, and kept all shares. For the sake of simplicity, I would assume that all dividends received were not reinvested. Otherwise, the numbers get even higher, but messier too.
While his ownership of the float would have likely remained around 50%, after accounting for issuance of stock options and restricted stock units to employees, with dividends reinvested he could've been in a hypotetical situation where his ownership is more than 100%. Which of course is impossible.
The stock has gone through nine stock splits since its IPO in 1986.
This means that each share from 1986 would have turned to 288 shares today after all the splits.
This also means that his 11,222,000 shares from 1986 would have turned to 3,231,936,000 shares today.
At the current share price of $455/share, this translates into a net worth of almost $1.5 trillion dollars.
This means that Bill Gates would have been the world's first trillionaire.
He would have also been richer than the richest people in the world today.
These are the four richest people in the world today, according to Forbes:
Gates could have been richer than all four combined.
Instead, he's worth "only" $115 billion today, and is number 12 on the list of the world's richest people.
Of course, this is mostly a discussion with a lot of hindsight bias.
Back in 1986, Bill Gates did not really know how the next 38 years would unfold. It could have been very likely that Microsoft did not survive or if it did, it did not deliver the amazing returns it did.
In general, it makes sense to diversify your investments in order to protect yourself from unknown risks. It's also a good idea to give back and help those in need.
My take-away from this story is that I should keep my winners for as long as possible, and not diworsify away any potential. While I start my strategy with a diversified exposure to a large group of entities that fit my criteria, I do believe that the key to building long-term wealth is to let winners run.
When auditing my investment decisions, I realized that selling too early was one of my biggest mistakes.
In other words, you want to water the flowers and cut the weeds. If you sell out those future wealth builders too early, you may not make a lot of money in your strategy overall. Since you do not really know which of your portfolio holdings will be the best performing ones over the next 40 years, it makes sense to avoid too much turnover and selling them prematurely.
Higher turnover is associated with a higher potential for making a mistake, and increasing costs.
That being said, it's also good to have some diversification as well. After all, things could have gone wrong for his net worth, if Microsoft had not performed as it did. The company had to work hard to endure the changes in the business and tech world for decades, and thrive as well. But as we all know, different paths could have led to different outcomes as well.
